Thursday, 8 March 2012

Say goodbye to anonymity, say hello to the reputation economy

In this blog post, I make six contentions:
1. The reputation economy is here
2. Collaborative consumption doesn't work without trust
3. Anonymity is the antithesis of trust
4. It's time for a transportable reputation score
5. People will behave better in a reputation economy
6. Australia needs to catch up if the reputation economy is to take off

The reputation economy is here
Can you trust the cordless drill you buy online?
Online shopping is amazing. For the first time in history, one can buy a cordless drill from the comfort of one's home while wearing pyjamas.
However, online shopping brings with it an inherent problem. How can you trust the merchant? How do you know that the drill you buy online is actually going to work? What guarantee do you have that the drill isn't going to conk out after three months? How can you tell whether the online store is legit or whether it's going to steal your credit card details?

eBay succeeded because of its reputation system
That's the precise reason why eBay introduced its reputation system. The power is in the hands of the consumer to rate whether the drill retailer delivered on their marketing promises or not. Now you know which drill you can and cannot trust. Research has shown that reputation matters: Resnick et al. found that sellers with a good eBay reputation attract a 8.1% premium on their products. Even the slightest bit of negative feedback is enough to put buyers off. Would you buy from a drill seller with an angry comment "HE TOOK 8 WEEKS TO SEND THE DRILL AND THEN IT DIDN'T EVEN WORK!!! DON'T BUY FROM THIS SELLER!!!"

Reputation is going offline
Now that eBay has shown the way, websites are springing up to rate businesses in real life. (Word of Mouth Online) is an Australian service that allows people to leave reviews of businesses they've dealt with. Before going into a hardware store, you can jump online and see what other people have had to say about the store.

Collaborative consumption doesn't work without trust
Collaborative consumption requires you to trust people not just products
Rating a product is easy. Provided the drill isn't custom made, you can be pretty sure that the drill someone else bought are going to be pretty similar to the ones you're about to buy. That means the feedback of other shoppers is fairly reliable. 

But what about if instead of buying the drill, you want to rent it? Think about it: how often do you really use a cordless drill? (On average: 2 hours per year) Sites like have sprung up to allow people to share things instead of needing to own them. 

Suddenly the story is very different. If you go onto one of these sites to find a drill to rent for a day, you'll find it very hard to decide which drill to rent. How do you know what condition the drill is in? Has the other person looked after the drill or is it a dud? Are you going to be opening yourself up to risk if you go over to this person's house? Are they using the drill as a lure to entice you into their garage, where they'll bash you over the head and steal your organs to sell on the black market? Now what you care about is not the reputation of the product, but the reputation of the person. Are they trustworthy? 

Rating trustworthiness
How do you know if someone is trustworthy? Most of the collaborative consumption services have inbuilt reputation systems so that you can rate your experience after you rent a drill from someone. This is helpful if the person has been in the community for a while. But what do you do if the person has just joined the community? They've got no track record. They're essentially anonymous. They might be a kleptomaniac or a serial killer for all you know. 

Anonymity is the antithesis of trust
You can't trust newbies

The 'newbie problem' (new members with no reputation) is one of the biggest barriers to the takeoff of collaborative consumption. Until someone has a track record, there's no reason to trust them. But how do they get a track record if no-one will give them a chance? Some people might be willing to give newbies the benefit of the doubt. While this is an admirable act of generosity, it also exposes the other person to risk.

Take the case of the alleged rapist on CouchSurfing that I blogged about earlier. This man allegedly sexually assaulted a couchsurfing host in Japan. He had a fresh profile with no history. Why? Because he had deleted his past profiles that had negative feedback from other hosts who had felt uncomfortable around him. There was nothing to link these profiles because he didn't have to verify his identity in any way. 

You can't trust anyone in an anonymous system
Even apparently reputable users with lots of positive feedback cannot be trusted in a reputation system without identity verification. A well known problem in reputation systems is the Sybil Attack. This is where someone creates fake accounts to give themselves positive feedback. If there’s nothing stopping the same person creating multiple accounts, there’s nothing to guarantee that their reputation score is credible.

It's time to pack your reputation capital in a suitcase
Portable reputation profile
Right now your reputation isn't portable at all. If you move to another city, no-one knows anything about you. If you've got a shocking reputation, this is great (the Newbie Problem in a nutshell)! How do we protect against dodgey people jumping into a new community and gaining a clean reputation? Similarly, how can we make it easier for people with a good reputation to keep it when they start a new activity? That's where a portable reputation profile comes in.

The Aggregated Composite Trust Model
I propose that we create an Aggregated Composite Trust Model (ACTM): a highly credible, third-party reputation profile that individuals will own. They could link this profile to their accounts on collaborative consumption services so that their reputation is transportable.
There are two parts to this model: the Composite Trust Model (CTM) and the Aggregated Trust Model (ATM).

Composite Trust Model
As proposed by Matei et al. (2009), the CTM involves combining 'vertical trust' (trust from an authority, e.g. someone's police record or credit history) with 'horizontal trust' (trust from one's peers, e.g. eBay ratings).
What this would mean in practical terms is that when you sign up for a collaborative consumption service like (ridesharing), you have the option of verifying your identity using your driver's licence number or passport number ('vertical trust').
Once you've verified your ID, people will trust you enough to give you the first ride. After that, you'll get feedback from other users ('horizontal trust') that will ultimately become more meaningful than the vertical trust because it is context specific.

Aggregated Trust Model
The step beyond that is to mix CTM with an Aggregated Trust Model (ATM aka cross community reputation). The ATM is based on the principle that someone's reputation in one area is somewhat useful in deciding whether they'll be trustworthy in other areas. For example, you're probably not going to choose to share a ride with the dodgey gumboot seller on eBay if you have to choose between him and someone with a squeaky clean eBay record.
In an ATM, you allow the user to link up their history on other websites. is an example of a commercial service that does this. It allows you to turn your eBay reputation score into a badge to display on other websites.

People will behave better in a reputation economy
Privacy concerns when anonymity disappears
Many people have raised concerns around privacy for reputation systems that involve identity verification. What happens if someone's reputation gets unfairly attacked and their reputation score remains in the public record? This is where it's so important for individuals to own their reputation profile and be able to hide aspects that they don't want to be made public. Privacy is still key. 

Buyers will avoid sellers with a blank reputation profile
However, in a reputation economy, neutral reputation is equivalent to bad reputation. The more people understand about the 'Newbie problem', the less likely they will be to trust people with a blank profile.

People will actively work to preserve or improve their reputation
What I see happening is that people with a poor reputation will have to start taking some serious corrective action. To recover their reputation, they're going to need to actively engage in reputation building activities. For example, it's conceivable that people would be more likely to trust someone who regularly volunteers in their community. We might see more people acting altruistically for the utilatarian goal of boosting their reputation. Being a consequentialist, I see this as a boon for society.

Australia needs to catch up if the reputation economy is to take off
Australia is behind in ID verification technology
The US government has made identity data publicly available for years. You can verify someone's ID online for free with a myriad of services. This is a necessary enabling technology for a reputation economy. Without ID verification, reputation scores are meaningless because people can just delete their profiles.
In Australia, ID verification is clumsy and expensive. There is no easy way to verify someone's ID. Services like GreenID are coming on the market but it looks as though they will be expensive to use. 
This is holding us back. Collaborative consumption isn't going to take off until identity verification becomes freely and cheaply available.

Would you sign up for a transportable reputation profile?

1 comment:

Anonymous said...

Awesome post Jeremy! I love the idea of the aggregated trust identity, well done. Let me know if u want my help to bounce ideas around.